Importance of Purchasing & Supply Management

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In order for a product to go from the manufacturing stage and into the hands of a consumer, it must follow a long journey guided by purchasing and supply management professionals who make important decisions regarding cost, quality and scheduling. These decisions can affect whether or not someone will buy a company’s product, and also make a big impact on the company’s revenue and sales. What would happen if Valentine’s Day chocolates were not available until September? Purchasing and supply management professionals focus on ensuring the right products are available at the right time and right place for their consumers.

Reducing Costs and Improving Savings

Purchasing has a direct impact on two of the most important factors that drive a company’s bottom line: cost and sales. Through initiating process improvements, product improvements and supplier relationship development, purchasing professionals are responsible for garnering cost savings for their organizations without trading off quality. On average, the cost of materials is two and a half times the value of all labor and payroll costs. As a result, companies see great value in purchasing and supply management professionals who are able to increase their savings and improve their costs.

Negotiating Successful Contracts

Directly related to procuring cost savings, purchasing and supply management professionals are tasked with negotiating terms with suppliers that benefit both parties. This important aspect not only affects revenue and sales, but also the relationship between the organization and the supplier. Strong negotiation skills and the ability to foresee long-term business relationships are two aspects successful purchasing and supply management professionals rely on. In addition to managing costs, fruitful contracts focus on the quality of the materials in addition to how and when they will be delivered. Time is a key factor of successful deals as the materials need to be available on schedule.

Developing Long-Lasting Supplier Relationships

Making one-off purchases is unusual and costly. Companies typically require supplies on an ongoing basis, and as a result, it’s important to develop enduring relationships with suppliers. This aspect of purchasing and supply management can add tremendous value to a business. By working with the supplier on a long-term basis, purchasing and supply management professionals can garner higher cost savings, increase competitive advantage and fine-tune schedules. Long-term relationships benefit both the purchaser and supplier and builds a level of trust, enabling both parties to succeed.

Mitigating Risk

Understanding the potential risks and developing innovative strategies to manage them is an important aspect of purchasing and supply management. Having a strong risk mitigation strategy can greatly affect an organization’s bottom line. Potential risks include fraud and transparency, intellectual property and counterfeit materials. In addition, purchasing and supply management professionals need to have a plan in place if supplies are delayed or the schedule changes.

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About the Author

Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.